Can the blockchain be hacked?
Exploring options to infiltrate the unbreakable technology
In the last decade, the word “Blockchain” has been resounding from coast to coast. Hardly will you find any internet-savvy person who is yet to hear the term “Blockchain” or “Crypto.”
It is estimated that over 300 million people use or interact with blockchain networks worldwide. This is about 3.75% of the world population.
Questions about Blockchain’s integrity pop up as more people interact with blockchains, making them part of their financial lives.
Can the Blockchain stand the test of time? Can the Blockchain be hacked?
Blockchains, by design, are hackproof. But is this something you can trust with your life savings?
Before we proceed, let us establish a definition for the term “Hack” in the context of this article.
What is hacking in the blockchain context?
A blockchain hack is a successful penetration and exploitation of a blockchain network state to change, confirm, add or alter the state of blocks either through cracking the encryption or overriding the consensus mechanism of the entire network.
Mouth fool? Yes.
Read it again.
By the definition above, let’s dive in and find out if a blockchain can be hacked.
Can blockchain technology be hacked? No, and yes
Short answer: No, a blockchain cannot be hacked.
This is because blockchains, by design, are decentralized, immutable, and distributed and use a consensus algorithm to determine the longest chain with lots of nodes actively participating and kept in check with incentive mechanisms.
The incentive mechanism of the Blockchain is enough to discourage bad actors. This is primarily the case with Proof-of-Stake (POS) consensus mechanism blockchains.
Long answer — yes, a blockchain can be hacked.
The only known way a blockchain can be hacked is the 51% attack.
What is a 51% Attack?
The 51% attack is also known as the majority attack. This attack happens when a bad actor or group of bad actors hijacks more than half of the entire network’s hash rate or computing power.
For instance, the Bitcoin Blockchain uses the Nakamoto consensus to determine the longest chain by majority node confirmation of the previous block. If the bad actor becomes the majority, they can alter the integrity of data stored in the blocks — thus hacking the Blockchain.
To be fair, every Blockchain is prone to a 51% attack at some point, and this is why blockchains are designed with incentive mechanisms to boost a network effect of a large pool of nodes.
The more independent nodes, the lesser the odds of getting 51% attacked.
Although 51% attacks are expensive, as you have to buy enough equipment and burn a substantial amount of fuel to power the equipment, 51% attack has happened in the Bitcoin SV, Verge, and Ethereum Classic blockchains.
Still on the long answer.
Let’s set aside the 51% attack — it’s expensive to run.
The Blockchain runs lots of adjacent processes, and these adjacent processes can be hacked in several ways.
5 Ways the blockchain side processes can be hacked
1/ Smart Contract Exploits
Most blockchains have capabilities to accommodate pieces of code written and deployed to them. This piece of code is called a smart contract. Poorly written smart contract codes can be exploited. Over $2B has been lost just this 2022.
2/ Routing attack
Connections to the blockchain networks require access over the Internet protocol through Internet service providers (ISP). A routing attack occurs when an attacker intercepts data as it is sent to an ISP and splits the network of computers (or nodes) into partitions. The network will continue functioning, but the hacker will include fraudulent transactions to the partitioned nodes.
3/ Sybil attack
The decentralization feature of the Blockchain means that anyone can participate and become a node. Someone — a bad actor — can run several nodes, as many nodes as possible, and try to overwhelm the entire network.
Proof-of-work consensus algorithms primarily secure many blockchains through “mining.”
Other blockchains have employed different algorithms to discourage Sybil attacks.
4/ Phishing
Phishing attacks are as old as the internet; it’s not a direct hack on the Blockchain but rather a hack on an individual interacting with blockchain and cryptocurrency applications.
Phishing occurs when a bad actor tries to trick an individual into thinking that a fraudulent link is actual and makes the individual reveal sensitive information.
5/ Human element
No matter how secure a system is, you can’t secure it from human errors. Social engineering attacks are a regular occurrence in the crypto world.
One of Blockchain’s biggest challenges is interoperability. For example, you can’t spend $BTC on the Ethereum network.
To solve this challenge, developers built bridges.
A blockchain bridge is an application that to allows people to move digital assets from one Blockchain to another.
But, blockchain bridges have a big flaw, and hackers know about it.
You can’t cover a system’s flaw for long. People will uncover it and exploit the flaw.
Anything that can go wrong will go wrong — Murphy’s Law.
The blockchain bridge problem
In March 2022, one of the biggest heists in the history of cryptocurrency happened on the Ronin bridge, and over $540 million worth of Ethereum and USDC stablecoin was stolen.
As of June 2022, 69% of crypto-related hacks have involved bridge heists, according to Chainalysis data.
Conclusion
Blockchain hacks are rare and expensive to exploit, but the side processes running on the Blockchain are vulnerable to exploits.
Blockchain’s trilemma will continue to give loopholes for attackers to exploit.
Nevertheless, blockchain researchers and developers should continue to ensure security and decentralization take higher priority.
Like any open system, blockchain networks can be infiltrated given sufficient resources.
